First off, THANKS go to Nick_ll for this solution. It was written in another thread but not in as much detail and I got help from him through PMs. This is by far the cleanest solution and does not involve running any new wires to the fuse box or elsewhere.

This mod will get rid of the hardwired low beams, interior (dash) lights, parking lights, and taillights that usually all come on with ignition on the early (93-95) e36s. 92's are a little different so I don't think this will work with 92s.

Your switch will function like this (AFAIK this is what it's like in Europe):

1) Remove lower dash under steering wheel (3 screws)
2) Remove "knee bolster" - this foamy beefy thing right under 1) (3 bolts)
3) Locate "left splice panel". It is above the kicker speaker/footrest. You will see a few bundles of wires running close to it.
4) Locate 5 GREEN/RED wires going into this splice panel
5) The 5 wires are plugged into a metal piece that "splices" the 5 wires together. This is encased in a plastic piece that plugs into the "splice panel".
NOTE: I found the plastic piece with the wires outside of the splice panel already, bundled with a big bundle of wires.
6) Remove the plastic casing (there are little plastic tabs you need to push from the inside of the piece where the wires go in)
7) ***THIS ORDER MAY NOT BE THE SAME ON YOUR CAR****

When holding the metal piece with the wires pointing UP and the bulgy sides of the metal piece facing you, the order of the wires in my car was from left to right:

1] Fuse 25 wire (this is the one that generally provides power with ignition to the other 4 wires)
2] Headlight switch - this goes to the headlight switch
3] Left parking light(corner) / left taillight
4] Right parking light(corner) / right taillight AND interior dash lights
5] Low beam relay - goes to low beam relay

8) Cut 1] and 2] from the metal connector.
9) Splice 1] and 2] back together directly leaving 2 spots on the metal connector. Solder and heatshrink/electrical tape.
10) Find the YELLOW wire (make sure it is pure yellow and doesn't have some other stripe) that starts behind the headlight switch. Try and follow it from behind the switch into the bundle that is beside the splice panel and close to the wires you've been working on.
11) Cut the YELLOW wire making sure you have enough wire left on both of the new ends.
12) Splice one of the new ends of the yellow wire into the metal piece that you cut 1] off of.
13) Splice the other new end of the yellow wire into position 2 of the metal piece where you cut 2] off of. Solder and heatshrink.
14) Put the plastic covering back on to the metal splice piece.
15) Tuck everything away
16) Put the knee bolster and lower dash back (leave the chime disconnected if you don't want the annoying chime when the door is open with the key in the radio position)

That's it!

This is very valuable for people that have HIDs in their low beams and don't want them constantly on.

It took me a few hours but that's because I didn't know what each of the 5 wires did and I had to figure it out and think about where to connect to the yellow wire and which wires to connect to it.